India’s forex reserves climb up

Amid global economic uncertainty and the downslide in the Chinese economy, there was some cheering news for the Indian economy as the latest Reserve Bank data shows India’s foreign exchange reserves grew by USD 920.6 million to USD 355.353 billion in the last week of August 2015. The major reason for the rise in forex is said to be higher foreign currency assets (FCAs) that is the major component of the overall reserves.
FCAs include the effect of appreciation and depreciation of the non-US currencies such as yen, euro and pound, which are held in the reserves.  The current amount of forex reserves is enough to pay for nine months of imports. It is expected to provide a buffer and smooth out normal import and debt servicing requirements over the year, according to the RBI report. Capital inflows in excess of the external financing requirement raised the foreign reserves to a high level.
The increase in forex reserves would help prevent undue volatility in the currency markets. “We try to prevent undue volatility. If we see undue volatility, we have the resources to deal with it,” said RBI governor Raghuram Rajan. Despite a gloomy global scenario, India’s macroeconomic indicators are strong and fundamentals of the Indian economy is very good.
India best performing economy among BRICS
For the first time ever, India is the best performing economy among the BRICS countries with Brazil, Russia and South Africa have all been badly hit, not to mention China which is facing one of its worst ever economic crisis in recent memory with its capital markets as well as real economy taking a massive hit. The Shanghai Composite Index fell by as much as 8.5 percent in recent times while the GDP growth rate is expected to be below 7 percent in the subsequent quarters. India’s economy on the other hand, is expected to grow more than 7.3 percent.  Traditionally, India’s resilient economic performance in the midst of the global financial crisis in 2008 or the eurozone crisis more recently has been overshadowed in the BRICS grouping due to China being the show piece as the driver of global growth.
While the latest crisis in China is seen as an opportunity for India by many, it needs to be remembered that, for India to continue growing it needs to make continue working on implementing economic reforms as well as sustain the present momentum. India needs to continue taking tough measures to withstand volatility of global markets.

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